Tuesday, November 20, 2007

Frank Partnoy's FIASCO: Ten Years On

A two-parter, from Conglomerate:

Conglomerate Books: FIASCO and Derivatives Trading: Setting the Scene

Posted by David Zaring

After graduating from Yale Law School, Frank Partnoy took two jobs as a derivatives trader, first with First Boston, and then with Morgan Stanley. FIASCO, published ten years ago, documents his experiences. It’s a story of disillusionment about a business that Frank comes to believe is rotten both in what it permits clients to do, and in how it permits banks to serve clients. On the client side, derivatives look like little more than either poorly understood gambling, or, at best, accounting legerdemain. But for banks, the incentives are more clear: the traders are urged to “go kill someone” because there’s “blood in the water,” and to “rip their faces off.” The “their” and the “blood” are/belong to the clients, and as for the traders, they come across as none too smart, terribly petulant, and no fun to be around....MORE

Conglomerate Books: FIASCO and Derivatives: The Critics

Posted by David Zaring

Because we certainly don’t want this Conglomerate mini-book group to be some kum-bi-yah group hug, or anything….

…I wondered how much of Frank’s disillusion was derivatives industry specific, and how much was based on the fact that work, especially work in your first job after law school (excepting clerking) isn’t exactly easy – or, often, fun. I’ve written about associate-lit, I’ve read plenty of assistant-lit … and I wondered if the predictable downsides of that first job colored Frank’s views. Derivatives do, after all, mean that you can hedge against risks in currency or commodity price fluctuations. Surely selling that – or buying it – doesn’t have to be involve quasi-fraud. But the tenor of the book is that derivatives almost always equal skulduggery. I would have loved to hear more about the why they link between the okay thing (derivatives) and the bad thing (financial shenanigans) was so strong, because I otherwise, as you can see above, felt free to supply my own surmise....MORE